Ready-to-Use Vesting Agreement Template for Equity Rights
A vesting agreement template helps companies, founders, employees, and advisers document how equity rights are earned over time. It can define the vesting schedule, cliff period, treatment on termination, acceleration events, transfer restrictions, and the parties’ responsibilities in a clear written format.
A vesting agreement records the conditions under which a person earns ownership of shares, options, or other equity rights over time. It is commonly used by startups with founders, employees, consultants, and advisers. A well-drafted agreement reduces uncertainty by setting out the schedule, the effect of leaving the business, and any special acceleration events. The document should be aligned with the company’s constitutional documents, equity plan, and applicable corporate and tax rules.
What a Vesting Agreement Is
A vesting agreement is a commercial arrangement between a company and a recipient of equity, or sometimes between shareholders, that makes ownership rights conditional on continued service or other agreed milestones. Rather than receiving unrestricted equity immediately, the recipient earns the right gradually during a defined vesting period.
The agreement may cover issued shares subject to repurchase, unissued shares, stock options, restricted stock units, or contractual rights to receive equity. The legal mechanism should match the type of award and the law governing the company.
Typical Uses
Founders often use vesting to ensure that ownership remains connected to continued contribution to the business. Companies also use it to encourage retention of employees, advisers, and consultants whose work is important to long-term growth.
Key Terms to Include
The document should identify the parties, the equity instrument, the total number of units, the vesting start date, and the applicable schedule. It should also state whether vesting is based solely on time, performance milestones, or a combination of both.
| Document field | Purpose | Frequent error |
|---|---|---|
| Equity award | Identifies the shares, options, or units covered | Failing to specify the class or plan |
| Vesting commencement date | Sets the date from which earning begins | Using an unclear or conflicting date |
| Cliff period | Delays initial vesting until a minimum service period | Not stating what vests at the cliff |
| Vesting schedule | Explains monthly, quarterly, or annual vesting after the cliff | Percentages do not total 100% |
| Termination treatment | Defines the outcome of unvested and vested rights | Not distinguishing voluntary and involuntary departure |
| Acceleration event | Addresses a sale, merger, or other change in control | Using vague trigger language |
The Cliff and Ongoing Vesting
A common structure is a four-year vesting period with a one-year cliff. Under that arrangement, no equity vests before the first anniversary, a specified portion vests on that date, and the balance then vests in regular instalments. The parties may choose a different structure when appropriate.
Important Commercial Decisions
Before signing, the parties should agree on the practical outcomes the agreement is meant to achieve. These decisions should be reflected consistently in the vesting agreement, board approvals, share register, option plan, and any shareholder agreement.
- Whether vesting is time-based, milestone-based, or hybrid.
- The total vesting period and any initial cliff.
- The treatment of unvested equity when service ends.
- Whether vested equity may be repurchased or transferred.
- Whether a sale of the company triggers full or partial acceleration.
For issued shares, a company may require the recipient to grant a repurchase option over unvested shares. For options or similar rights, the agreement should explain when unvested awards lapse and the deadline for exercising any vested awards after termination.
Editable template
Document template
VESTING AGREEMENT
This Vesting Agreement (the “Agreement”) is made on ____________________ at ____________________.
Company: ____________________, a company incorporated under the laws of ____________________, with registered office at ____________________ (the “Company”).
Recipient: ____________________, of ____________________, identification/company number ____________________ (the “Recipient”).
The Company and the Recipient are together referred to as the “Parties”.
Equity Award Details
| Variable | Details |
|---|---|
| Type of equity award | ____________________ |
| Class of shares / plan name | ____________________ |
| Total number of shares, options, or units | ____________________ |
| Vesting commencement date | ____________________ |
| Vesting period | ____________________ |
| Cliff period | ____________________ |
| Vesting frequency after cliff | ____________________ |
| Exercise price, if applicable | ____________________ |
| Governing law | ____________________ |
Terms and Conditions
- Grant. Subject to this Agreement, the Company grants the Recipient the equity award described above (the “Award”).
- Vesting. The Award shall vest beginning on ____________________. No portion shall vest before the end of the cliff period of ____________________. On completion of the cliff, ____________________ shall vest. The remaining Award shall vest ____________________ over the remainder of the vesting period, provided that the Recipient continues to provide services to the Company.
- Service Requirement. Vesting is conditional upon the Recipient’s continuous service as ____________________ from the vesting commencement date until the relevant vesting date, unless otherwise agreed in writing.
- Termination of Service. Upon termination of the Recipient’s service for any reason, any unvested portion of the Award shall ____________________. Any vested portion shall be treated as follows: ____________________.
- Transfer Restrictions. The Recipient shall not sell, assign, transfer, pledge, encumber, or otherwise dispose of any Award or related equity except with the Company’s prior written consent and in accordance with applicable law and the Company’s governing documents.
- Repurchase Right. To the extent permitted by applicable law, the Company may repurchase unvested shares upon termination of service at a price of ____________________, subject to written notice provided within ____________________.
- Change of Control. Upon a Change of Control, ____________________ of the unvested Award shall accelerate, subject to the following conditions: ____________________.
- Tax and Legal Compliance. The Recipient is responsible for obtaining independent tax and legal advice and for complying with any tax, reporting, or filing obligations arising from the Award.
- Entire Agreement. This Agreement, together with any applicable equity plan, shareholder agreement, and corporate approvals, constitutes the entire agreement concerning the Award.
- Governing Law and Jurisdiction. This Agreement shall be governed by the laws of ____________________. The courts of ____________________ shall have jurisdiction, unless the Parties agree otherwise in writing.
Signatures
Signed by an authorised representative of the Company:
Signature: ____________________
Name: ____________________
Title: ____________________
Date: ____________________
Signed by the Recipient:
Signature: ____________________
Name: ____________________
Date: ____________________
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How to Complete the Template
Use accurate corporate details and ensure that the recipient’s role is described consistently with any employment, consultancy, or service agreement. If the award is governed by an equity incentive plan, insert the plan name and confirm that the terms do not conflict.
- Identify the company, recipient, governing law, and effective date.
- State the equity instrument and the total number of shares or units.
- Complete the commencement date, cliff, and vesting instalments.
- Review termination, transfer, repurchase, and acceleration provisions before signature.
Use precise dates and numerical schedules, and have the company’s corporate records reviewed before granting or transferring any equity.
Termination, Transfers, and Change of Control
The agreement should state what happens if the recipient resigns, is dismissed, becomes unable to provide services, or dies. In many arrangements, unvested equity is forfeited, cancelled, or becomes subject to repurchase, while vested equity is treated according to the plan or applicable agreement.
Transfer restrictions are also important because they can prevent the recipient from selling, assigning, pledging, or otherwise disposing of equity without approval. A change-of-control clause should specify the event that triggers acceleration and whether acceleration is single-trigger or requires a qualifying termination after the transaction.
Frequently Asked Questions
Is a vesting agreement the same as a share purchase agreement?
No. A share purchase agreement governs the acquisition of shares, while a vesting agreement governs when ownership rights become unconditional or when restrictions on the award lapse. Both documents may be used in the same transaction.
Can vested equity be lost after termination?
It depends on the agreement, the equity plan, and applicable law. Vested rights may remain with the recipient, be subject to a repurchase right, or need to be exercised within a stated period if the award is an option.
Does a vesting agreement require board approval?
Many companies require board approval, shareholder approval, or both before issuing shares or granting options. The required process depends on the company’s governing documents and the law of its jurisdiction.